This
case primarily concerns a purported discharge of mortgage and
the doctrine of equitable subrogation, which "is
available to place a new mortgage in the same priority as a
discharged mortgage if the new mortgagee was the original
mortgagee and the holders of any junior liens are not
prejudiced as a consequence." CitiMortgage, Inc v
Mtg Electronic Registration Sys, Inc, 295 Mich.App. 72,
81; 813 N.W.2d 332 (2011). The loan obtained by the
mortgagors and secured by the "new" mortgage at
issue in this lawsuit was used, in part, to fully
satisfy and discharge the original mortgage, with both
mortgages being held by the same mortgagee. A second and
different mortgagee had recorded its mortgage relative to the
same real property during the interim, making it a junior
lienholder at the time of recordation. The loan secured by
the new mortgage exceeded the amount due under the original
note, and the mortgagors, for the most part, pocketed the
remaining loan proceeds. Thus, the new loan and mortgage
involved more than a mere refinancing transaction; there was
an increase in the principal amount. The closing on the new
mortgage entailed a faxed discharge of mortgage from the
junior lienholder that was ultimately never recorded, given
that, according to the junior lienholder, the discharge was
conditioned on no new money being lent and on the preparation
and recording of a mortgage to replace the discharged
mortgage, neither of which conditions was met. Subordination
of mortgages under the process outlined in MCL 565.391 was
not attempted. Several years later, the mortgagors defaulted
on the mortgage that had originally been recorded second in
time, and foreclosure proceedings were commenced by an
assignee traced back to the one-time junior lienholder,
resulting in the assignee's purchase of the real property
at a sheriff's sale. An assignee of the mortgagee that
had held the original and new mortgages then instituted the
current action, alleging various causes of action and
claiming priority of its assigned mortgage interest on the
basis of the discharge of mortgage and equitable subrogation.
The main questions posed in this appeal regard the validity
of the discharge and the applicability of the doctrine of
equitable subrogation under the described circumstances.
Arguments in favor of the doctrine's applicability and
the discharge's validity were advanced by plaintiff Wells
Fargo Bank, N.A., as Trustee for Option One Mortgage Loan
Trust 2005-2 Asset Backed Certificates, Series 2005-2 (Wells
Fargo). The trial court rejected Wells Fargo's attempt to
employ equitable subrogation and the discharge to its
benefit, granting summary disposition in favor of defendants
SBC IV REO, LLC (SBC), and Capitol National Bank (Capitol).
Wells Fargo appeals as of right, and we hold that the
discharge of mortgage was ineffective and unenforceable as a
matter of law for failure to satisfy conditions precedent,
but that equitable subrogation is available to Wells Fargo,
albeit to the exclusion of the new or additional monies.
Accordingly, we affirm in part, reverse in part, and remand
for further proceedings.

I.
BACKGROUND

In
December 2003, two individuals, as tenants in common, granted
a mortgage to Option One Mortgage Corporation (Option One) on
certain real property located in Mackinac County, securing a
$449, 000 loan made by Option One to the mortgagors under a
promissory note. The mortgage was recorded that same month.
In August 2004, the same mortgagors, joined by a spouse in
order to bar any right of dower, granted a $400, 000 mortgage
to Capitol with respect to the same real property encompassed
by the first mortgage, partially securing a loan in excess of
$1 million. This mortgage was recorded in September 2004, and
for purposes of this opinion and ease of reference, we shall
refer to it as the Capitol mortgage.

In
April 2005, the two mortgagors granted a "new"
mortgage to Option One in regard to the real property,
securing a $520, 000 loan. According to the settlement
statement pertaining to the closing, $458, 109 of the loan
proceeds were used to pay off the entire balance on Option
One's original mortgage and, after disbursements to cover
settlement charges and delinquent taxes, the mortgagors
received the remaining $34, 566. This mortgage was recorded
in May 2005, and we shall refer to it as the Option One
mortgage.[1] In June 2005, Option One recorded a
satisfaction of mortgage with respect to its original
mortgage. There was no modification of the original Option
One mortgage; rather, it was completely discharged and
replaced. The satisfaction of mortgage provided that
"Option One . . . has received full payment of [the]
promissory note, acknowledged satisfaction of said mortgage
and hereby directs the clerk of the Circuit Court of the
above described county to cancel the same of record."

We must
take a moment to explore the circumstances surrounding the
closing relative to the Option One mortgage. A couple of
months prior to the closing, [2] the title company prepared a
commitment for title insurance in regard to the planned
transaction, which acknowledged the Capitol mortgage and the
original Option One mortgage in schedule B, section 1 of the
commitment, and which called for a discharge of those
mortgages at the closing, otherwise they would be shown as
being excepted on the final title insurance policy. Closing
instructions from Option One to the closing agent directed
that the mortgage must record in "First Lien
Position." Given the existence of the Capitol mortgage,
the closing agent or someone from the title company contacted
Capitol in order to obtain a discharge of the Capitol
mortgage, conceptually allowing for a priority recording of
the Option One mortgage upon discharge of the Capitol
mortgage, followed by the recording of a newly-prepared
replacement mortgage in favor of Capitol, with Capitol
thereby retaining its junior lienholder position.

An
assistant vice-president for Capitol faxed a discharge of
mortgage to the title company's closing department. In an
affidavit obtained for purposes of the litigation, the
assistant vice-president averred that she had faxed the
discharge of mortgage under the belief that the Option One
mortgage only entailed the refinancing of the original
mortgage, "without the new loan advancing any new money
that would be secured with [the] new mortgage." She
further averred:

In response to the Title Company Request[, ] I had prepared
and executed the Discharge of Mortgage . . ., telefaxed the
Discharge of Mortgage to the Title Company representative and
advised the representative from the Title Company that the
original Discharge of Mortgage would be provided and could be
recorded upon confirmation that no new money was being loaned
to [the mortgagors] and . . . that [the] Title Company would
record the replacement [Capitol] Mortgage to secure
[Capitol's] position. This would have been the standard
practice of [Capitol], in that an original, effective,
recordable discharge of mortgage would not be provided until
either funds were obtained to pay-off the [Capitol] loan
secured by the mortgage or [Capitol's] equity position
was not in any way impaired and a replacement mortgage was
prepared and recorded or to be recorded contemporaneous with
the discharge. If the title company had requested an
original, recordable discharge of mortgage, [Capitol's]
practice would have been to provide it to the title company
in escrow subject to an agreement that it could only be
released and recorded when these conditions had been met.

The
assistant vice-president also indicated that the Capitol
mortgage was not paid off, that the Option One mortgage
"was for an increased principal amount, " and that
no replacement mortgage was recorded on behalf or in favor of
Capitol. And, therefore, the conditions precedent to
Capitol's agreement to discharge the mortgage were never
satisfied. In turn, according to the assistant
vice-president, Capitol did not record the discharge of
mortgage, nor was a discharge ever effectively
delivered.[3] In a letter from the title company to
Option One dated April 15, 2005, Option One was informed that
the closing had occurred, that the title company had
"completely disbursed the mortgage in the amount of
$520, 000, " and that the mortgage constituted "a
valid first lien on the property, subject only to those
encumbrances shown in Schedule B, Section II of [the]
commitment."[4] In the title insurance policy dated May 2,
2005, there is an express exception for the Capitol mortgage,
specifying that the policy did not insure against loss or
damage arising out of the Capitol mortgage.

In
August 2005, a few months after the closing on the Option One
mortgage, one of the mortgagors conveyed his
tenants-in-common interest in the property to the other
mortgagor pursuant to a quitclaim deed. In May 2009, American
Home Mortgage Servicing, Inc. (American Home), as
successor-in-interest to Option One, assigned the Option One
mortgage to Wells Fargo. However, in August 2011, Wells Fargo
recorded an affidavit to expunge or rescind the assignment,
claiming that it was not executed by an authorized signer for
American Home. But then in March 2012, Sand Canyon
Corporation, formerly known as Option One, executed and
recorded an assignment that assigned the Option One mortgage
to Wells Fargo. At the time of the instant litigation, Wells
Fargo held the Option One mortgage. The lower court record
contains various documents, including title worksheets
contemplating foreclosure on the Option One mortgage,
property reports, demands on the title insurance policy
relative to the Option One mortgage, a fax seeking to obtain
the discharge of mortgage, and law firm communications to its
client, Option One and later Wells Fargo, that were dated
from before the failed May 2009 assignment to Wells Fargo to
after the successful March 2012 assignment to Wells Fargo.
These documents made clear that, for purposes of the
public record at the register of deeds office, the
Capitol mortgage remained in existence, it had not been
discharged, and it was superior to the Option One mortgage.
The documents further reflected that Wells Fargo was well
aware of these facts and the lack of a recorded discharge of
mortgage before accepting the 2009 and 2012 assignments,
although Wells Fargo did not appear to know the reasons why
the discharge had not been recorded. Evidently, the Option
One mortgage had been in default, but foreclosure proceedings
were not pursued, ostensibly because of the Capitol mortgage
conundrum.

On
March 11, 2013, in an earlier, separate lawsuit, Wells Fargo
filed a quiet-title action against Capitol, acknowledging the
Option One and Capitol mortgages and Wells Fargo's status
as an assignee of the Option One mortgage, and alleging that
the Option One mortgage was superior. Wells Fargo asserted
that Capitol's mortgage had "been paid off or
otherwise satisfied, however no discharge of mortgage ha[d]
been recorded and [Capitol's] mortgage remain[ed] in
senior lien position[, ]" even though the Option One
mortgage "was intended to be a senior mortgage on the
Property." Wells Fargo further alleged that
Capitol's "failure to record a discharge of mortgage
[was] creating a cloud on [Wells Fargo's] claim to the
Subject Property[.]" Wells Fargo asked the circuit court
to discharge the Capitol mortgage, terminate any interest in
the property claimed by Capitol, and to recognize the Option
One mortgage now held by Wells Fargo as the senior lien on
the property.

On May
31, 2013, while Wells Fargo's quiet-title action remained
pending, Capitol assigned its mortgage to SummitBridge Credit
Investments IV, LLC (SummitBridge), upon SummitBridge's
purchase of the underlying loan. The assignment was recorded
on August 8, 2013. Also on August 8, 2013, Wells Fargo and
Capitol stipulated to the dismissal of Wells Fargo's
quiet-title action without prejudice, with the circuit court
entering an order to that effect on August 20,
2013.[5] On August 27, 2013, SummitBridge assigned
the Capitol mortgage to SBC, which was a SummitBridge
affiliate. At the time of the instant litigation, SBC held
the Capitol mortgage.

An
asset manager connected to SummitBridge and SBC executed an
affidavit in which he averred that in entering into the loan
purchase agreement and related assignment with Capitol,
SummitBridge had relied on the Capitol mortgage being a first
or senior mortgage on the real property. The asset manager
further asserted that "[n]either SummitBridge nor SBC
received any notice from Option One, Wells Fargo or any other
entity or person of the existence of a copy or original of
the document entitled "Discharge of Mortgage"
referenced in, and attached as Exhibit F, to Wells
Fargo's Complaint [in the instant action], until on or
about May 14, 2014." The asset manager additionally
averred that had SummitBridge been informed of the
allegations made by Wells Fargo concerning equitable
subrogation and the purported discharge of the Capitol
mortgage prior to SummitBridge's purchase of the Capitol
loan, "it would have either not have entered into the
Loan Purchase or would have otherwise paid a purchase price
substantially less than that which was agreed
thereunder."[6]

In a
notice of foreclosure sale dated October 31, 2013, SBC
indicated that there had been a default relative to the
Capitol mortgage, with nearly $700, 000 due and owing on the
promissory note.[7] The foreclosure sale was scheduled for and
conducted on December 5, 2013, where SBC purchased the
property for $371, 000 under a sheriff's deed. A
six-month redemption period applied and was set to expire on
June 4, 2014.

On May
22, 2014, Wells Fargo filed its complaint in the present
action against Capitol and SBC, alleging six separate counts.
In count I of the complaint, Wells Fargo alleged that Capitol
had unlawfully failed to discharge the Capitol mortgage.
Wells Fargo asserted that Capitol had a statutory obligation
to file or record the discharge of mortgage that had been
faxed to the title company for purposes of the closing on the
Option One mortgage. Wells Fargo further alleged that Option
One had only agreed to the new mortgage on the condition that
it would retain first priority lien position, that Capitol
had induced Option One into proceeding with the closing and
new mortgage by agreeing to the discharge, that Capitol faxed
a discharge of mortgage to the closing agent, and that
Capitol then failed to record the discharge. In count II of
the complaint, Wells Fargo alleged common-law indemnity,
claiming that Capitol should indemnify Wells Fargo for any
monies required to be paid in order to redeem the property.
The basis for the indemnity claim was that Capitol's
failure to honor and record the discharge of mortgage was
wrongful. In count III of the complaint, Wells Fargo alleged
fraud and misrepresentation, once again relying on the
underlying facts surrounding the faxed discharge of mortgage
and Capitol's failure to record the discharge. In count
IV of the complaint, Wells Fargo assumed the record priority
of the Capitol mortgage and alleged equitable subrogation,
which, as explained in the opening paragraph of this opinion,
"is available to place a new mortgage in the same
priority as a discharged mortgage if the new mortgagee was
the original mortgagee and the holders of any junior liens
are not prejudiced as a consequence."
CitiMortgage, 295 Mich.App. at 81. In count V of the
complaint, Wells Fargo alleged a claim to determine an
interest in land under MCL 600.2932, contending that the
Option One mortgage assigned to Wells Fargo was
"superior to all other liens" that might encumber
the property. Although not directly expressed in count V,
which constituted a quiet-title claim, the allegations
contained therein in support of Wells Fargo's contention
that it held the senior lien on the property essentially
reflected reliance on the doctrine of equitable subrogation
and on the unrecorded discharge of mortgage. In count VI of
the complaint, Wells Fargo alleged that the foreclosure by
advertisement conducted by SBC was invalid, given that SBC
had no interest in the property to foreclose upon in light of
Capitol's discharge of the mortgage. As gleaned by review
of the six counts in Wells Fargo's complaint, it becomes
clear that the case ultimately boils down to two broad
primary issues, i.e., the applicability of equitable
subrogation and the validity and enforceability of the faxed
discharge of mortgage.

Contemporaneous
to the filing of its complaint, Wells Fargo filed a motion
for a temporary restraining order (TRO), show cause order,
and for a preliminary injunction, seeking to toll the running
of the redemption period arising out of the foreclosure sale.
On the day of the filing of the complaint and motion, the
trial court entered an ex parte TRO, tolling the redemption
period until further order of the court and setting the
matter for a hearing on June 20, 2014. The hearing was
conducted as scheduled, and by order dated June 23, 2014, the
trial court converted the TRO to a preliminary injunction and
extended the redemption period for 14 days. By amended order
dated June 30, 2014, the trial court reversed its position
and dissolved and terminated the TRO and preliminary
injunction, concluding that SBC had been a bona fide
purchaser without notice of any alleged mortgage discharge
and thus Wells Fargo could not establish a threat of
irreparable harm or a likelihood of prevailing on the merits.

The
parties filed multiple competing motions for summary
disposition, and after entertaining oral argument on the
issues at two hearings, the trial court entered a couple of
orders denying Wells Fargo's motion for summary
disposition and granting summary disposition in favor of SBC
and Capitol for the reasons stated on the record at a hearing
on May 22, 2015. At that hearing, the trial court initially
observed that "[t]here wasn't a discharge." The
court stated that the discharge of the Capitol mortgage was
subject to a "condition precedent" of being paid
off and that "within two weeks' time, everybody knew
that [the] mortgage was still there." With respect to
equitable subrogation, the trial court found that
CitiMortgage was distinguishable and did not support
application of the doctrine, considering that, relative to
the Option One mortgage, "the new money made it a new
mortgage and not a refinance[.]" The trial court also
concluded that the equitable subrogation claim was
time-barred under a six-year statute of limitations and that
prejudice would be incurred if the doctrine was invoked. For
these reasons, the trial court granted summary disposition in
favor of SBC on counts IV (equitable subrogation), V
(superior interest in land), and VI (invalid foreclosure),
which were the only counts applicable to SBC, under MCR
2.116(C)(7), (8), and (10). The trial court indicated that
counts IV through VI were inapplicable to Capitol;
nonetheless, the court granted summary disposition in favor
of Capitol on those counts.

With
respect to counts I (failure to honor and record discharge of
mortgage) and II (common-law indemnity), which were solely
applicable to Capitol, the trial court granted summary
disposition under MCR 2.116(C)(7) on the basis that the
claims were time-barred pursuant to a six-year statute of
limitations and under MCR 2.116(C)(8) for failure to state a
claim. In regard to count III (fraud and misrepresentation),
which also pertained solely to Capitol, the trial court
ruled:

As to the fraud claims, the statute requires a clear and
convincing demonstration that some fraud has occurred, and
the Court just does not see it based on the pleadings and the
arguments that have been made by Counsel.

The
trial court relied on MCR 2.116(C)(7), (8), and (10) in
ruling on the motions for summary disposition. With respect
to MCR 2.116(C)(7), which provides, in part, for summary
dismissal when an action is barred by a statute of
limitations, this Court in RDM Holdings, Ltd v
Continental Plastics Co, 281 Mich.App. 678, 687; 762
N.W.2d 529 (2008), observed:

Under MCR 2.116(C)(7) . . ., this Court must consider not
only the pleadings, but also any affidavits, depositions,
admissions, or other documentary evidence filed or submitted
by the parties. The contents of the complaint must be
accepted as true unless contradicted by the documentary
evidence. This Court must consider the documentary evidence
in a light most favorable to the nonmoving party. If there is
no factual dispute, whether a plaintiff's claim is barred
under a principle set forth in MCR 2.116(C)(7) is a question
of law for the court to decide. If a factual dispute exists,
however, summary disposition is not appropriate. [Citations
omitted.]

In
regard to MCR 2.116(C)(8), which provides for summary
disposition when a "party has failed to state a claim on
which relief can be granted, " it tests the legal
sufficiency of a complaint. Beaudrie v Henderson,
465 Mich. 124, 129; 631 N.W.2d 308 (2001). The trial court
may only consider the pleadings in rendering its decision.
Id. All factual allegations in the complaint must be
accepted as true. Dolan v Continental
Airlines/Continental Express, 454 Mich. 373, 380-381;
563 N.W.2d 23 (1997). "The motion should be granted if
no factual development could possibly justify recovery."
Beaudrie, 465 Mich. at 130.

In general, MCR 2.116(C)(10) provides for summary disposition
when there is no genuine issue regarding any material fact
and the moving party is entitled to judgment or partial
judgment as a matter of law. A motion brought under MCR
2.116(C)(10) tests the factual support for a party's
claim. A trial court may grant a motion for summary
disposition under MCR 2.116(C)(10) if the pleadings,
affidavits, and other documentary evidence, when viewed in a
light most favorable to the nonmovant, show that there is no
genuine issue with respect to any material fact. A genuine
issue of material fact exists when the record, giving the
benefit of reasonable doubt to the opposing party, leaves
open an issue upon which reasonable minds might differ. The
trial court is not permitted to assess credibility, weigh the
evidence, or resolve factual disputes, and if material
evidence conflicts, it is not appropriate to grant a motion
for summary disposition under MCR 2.116(C)(10). A court may
only consider substantively admissible evidence actually
proffered relative to a motion for summary disposition under
MCR 2.116(C)(10). [Citations and quotation marks omitted.]

C.
DISCUSSION

1.
PURPORTED DISCHARGE OF CAPITOL MORTGAGE

Counts
I, II, III, V (in part), and VI of Wells Fargo's
complaint were reliant on the discharge of mortgage that the
assistant vice-president for Capitol had faxed to the closing
department of the title company handling the closing on the
2005 Option One mortgage. Count I alleged an unlawful failure
to discharge the mortgage and record the discharge; count II
alleged common-law indemnity predicated on a failure to honor
and record the discharge; count III alleged fraud and
misrepresentation for Capitol's failure to follow through
and record the discharge as promised; count V sought a
determination that Wells Fargo's mortgage interest was
superior to SBC's mortgage interest based, in part, on
the discharge of the Capitol mortgage; and count VI alleged
that SBC's foreclosure was invalid because there was no
mortgage to foreclose upon given the discharge.

Within
the pertinent time period, as prescribed by MCL 565.44(2),
"after a mortgage has been paid or otherwise satisfied,
the mortgagee . . . shall prepare a discharge of the
mortgage, file the discharge with the register of deeds for
the county where the mortgaged property is located, and pay
the fee for recording the discharge." MCL 565.41(1). A
mortgagee is liable for statutory and actual damages for
refusing or neglecting to discharge a mortgage "after
full performance of the condition of the mortgage, . . . or,
if the mortgage is entirely due, after a tender of the whole
amount due[.]" MCL 565.44(1).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There
is no dispute that the mortgagors did not pay off, satisfy,
or fully perform the conditions of the Capitol mortgage, so
there was no general statutory entitlement to a discharge of
mortgage. Rather, this case presented an attempted
subordination of mortgages as between the Capitol and Option
One mortgages, through the planned use of a discharge of
mortgage and a replacement mortgage, whereby Option One would
retain its superior lien position despite recording the 2005
Option One mortgage after the 2004 Capitol mortgage
had been recorded. See Black&#39;s Law Dictionary
(7th ed) (defining a "subordination agreement" as
"[an] agreement by which one who holds an otherwise
senior interest agrees to subordinate that interest to a
normally lesser interest"). Stated otherwise, Option One
and Capitol contemplated subordination of Capitol&#39;s first
lien to a second or junior lien, although not through the
mechanism set forth in MCL 565.391.[8 ...

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